U.S. Secretary of State Colin Powell says he is optimistic India and Pakistan will begin a dialogue soon, but that "further action" is needed before military tensions in the region ease. Mr. Powell's comments came as he ended a visit to New Delhi, before traveling to Nepal where he is expected to offer a pledge of support to Nepal's fight against a Maoist insurgency.

Secretary Powell said his diplomatic mission to ease tensions in South Asia had left him confident that India and Pakistan will settle their current crisis in a peaceful manner.

In a joint news conference with India's Foreign Minister Jaswant Singh prior to his departure for Kathmandu, Mr. Powell said he is optimistic the current crisis can be solved through diplomacy. "I leave here very encouraged that we can find a solution to this troubling situation," he said.

Mr. Powell said he exchanged a number of ideas with India's Prime Minister Atal Behari Vajpayee on how to ease tensions with Islamabad. He said both India and Pakistan should tone down their rhetoric, re-examine diplomatic sanctions and eventually de-escalate militarily.

The current crisis was sparked after terrorists attacked India's parliament, December 13. New Delhi says two Pakistan-based militant Kashmir separatist groups carried out the attack.

In a speech last week, Pakistan's President General Pervez Musharraf banned the two groups and pledged not to allow Pakistan to be used as a base for terrorism in India's state of Jammu and Kashmir.

India's foreign minister said he welcomes General Musharraf's steps, and confidence will be restored with Pakistan if Islamabad also hands over about 20 suspected criminals and terrorists living in Pakistan. "There has already been some action, which India has welcomed," he said. "And if there is action in regard to the 20 wanted terrorists and criminals, I am very hopeful there will be distinct movement towards moving towards a situation similar to what existed before December 13."

Even though tensions have eased since General Musharraf's speech last week, both countries have hundreds of thousands of troops massed along their borders; and there is almost daily firing across the "line of control," the cease-fire line that divides the territory of Kashmir between India and Pakistan.

Secretary Powell said he, too, believes General Musharraf is making progress on his stated goals of ending terrorism and extremism in the region but further action needs to be taken, especially on reducing cross-border infiltration in Indian Kashmir. He said it is up to India to decide when it wants to talk with Pakistan. Mr. Powell said progress is being made, but the situation is far from stable and further acts of terrorism are a concern. "I think we are on a path that will take us where we want to go," said the secretary. "What we have to do is to remain patient, to remain committed to the diplomatic track, to recognize that this is a time of high tension when you have military forces in proximity to each other. We also have to be mindful that there are people out there who might want to create another incident, create another conflagration and we have to be sensitive to that."

Mr. Powell said both countries are off to what he described as a good start in their bid to ease tensions. He said he does not believe in a timetable for a resumption of dialogue between New Delhi and Islamabad - saying it is up to both countries to decide for themselves when that should take place.

From New Delhi, Mr. Powell flew to Kathmandu, becoming the first U.S. Secretary of State to visit the Nepal since the United States and Nepal established diplomatic ties in 1947.

Mr. Powell was meeting with Nepal's Prime Minister Sher Bahadur Deuba and with King Gyanendra. Nepali officials said they would request assistance from the U.S. to fight Maoist rebels who have been fighting for five years to abolish Nepal's constitutional monarchy and turn the country into a Maoist state. More than 2,000 people have died in the fighting.

Last November, after the rebels ended a four-month cease-fire, King Gyanendra ordered Nepal's army to join the country's police in fighting the rebels.